This post is by Darren Woolley, Founder of TrinityP3. With his background as analytical scientist and creative problem solver, Darren brings unique insights and learnings to the marketing process. He is considered a global thought leader on agency remuneration, search and selection and relationship optimisation.
It is interesting how traditionally the conceptualisation or ideas phase and the production or implementation phase has been seen as a continuum. That is the agency that is briefed on the project also produces the project.
This stems back many years when creative and production was offered as part of the process of the agency selling media. What was the point of the client buying media and then developing the creative in-house (which was the standard at the time) when the agency could provide this service as part of the media commission and of course a little service fee on top.
It is interesting because technology and a demand for greater accountability on cost effectiveness are continuing to change this view. More than a decade ago, major advertisers in the UK began to decouple production from the agencies. Television, print and later digital production is being outsourced to production specialists, who are more efficient than the agencies at delivering the outputs required.
There are largely two main directions this takes:
- Going directly to the suppliers the agencies have traditionally used and forming direct relationships with these suppliers eg. Production Companies, Post Production Companies, Print Studios, Digital Workshops
- Going to one of the growing number of transcreation companies that have grown, primarily out of the UK and Europe but are increasingly multinational and global
Why decouple production from your agency?
- Many agencies structure their remuneration to rely heavily on the production process to subsidise the conceptualisation process (as apparently no-one wants to pay for ideas?) and therefore costs can be high
- If you are a high volume and especially a fast turn-around advertiser (think retail, telco and financial services) there are economies of scale that are difficult to achieve with the agency alone
- The specialist transcreation companies have invested heavily in workflow and approvals systems to speed up the process and lower the overheads and so provide a low-overhead, lower cost alternative
- You are using multiple agencies for ideas and conceptualisation so you can deliver economies of scale at the production-end consolidating with a single supplier
So which way do you go?
The answer to this depends on your production requirements. The questions you have to consider are:
- Where is the majority of your production spend? Is it in a particular media production such as television or digital or print or across all areas?
- What is the size of your spend? Is there enough to deliver the economies of scale to make the decoupling process worthwhile.
- How cost effective is your current production? Are your incumbent suppliers delivering the efficiencies for your spend?
- What is the nature of the spend? Is it creating new productions or is it largely working to templates or creating multiple versions?
- How centralised or decentralised is your production requirement? Are you a single market advertiser or do you develop executions from the core brand idea across multiple and diverse markets?
Case Study 1 – Decoupling television post production
A telco client approached TrinityP3 concerned over their increasing cost of television production. We reviewed the past three campaigns and identified the heavy use of CGI effects in the agency developed campaign as the main driver with each production more complex than the last. Reviewing the proposed production spend and schedule for the coming year we were able to develop a business case for decoupling the CGI and post production from the agency and assisted the client in the process to deliver a 27% saving on their post production costs.
Case Study 2 – Transcreation services across multiple regional markets
An Australian advertiser had traditionally used an agency network to develop the primary brand strategy in Australia and then customise the creative concepts to suit each of the regional markets across Asia Pacific. Invited to assist with their agency review, TrinityP3 identified a significant component of the incumbent’s spend, especially in these regional markets was production. In fact the low agency fees in these markets were being more than subsidised by a higher than expected production cost. We developed a business model from our knowledge of the main transcreation companies and identified an initial 32% saving on production costs.
Case Study 3 – Off-shoring digital production services
A financial services company had several years earlier engaged a digital agency with off-shore capabilities to provide their digital build requirements. TrinityP3 was asked to review the process and costs of this arrangement and identified that the off-shoring facility was under utilised. As the digital production spend had grown the agency had continued to perform more of this work locally than off-shore. TrinityP3 was able to provide the client with a number of options including a financial model for decoupling digital production to an off-shore facility that would reduce their annual costs by more than 50% in the first year with no loss of quality or increased risk.
Of course decoupling production from your creative agency is not for every advertiser. The process is time consuming and can pose significant risk if poorly executed. But for those advertisers with the right requirements, spend and mix to make it worthwhile it can deliver significant savings.
The agencies largely are against it, primarily as it reduces their revenue. But what are some of the risks or issues that you have heard about the decoupling process?
Leave a comment here so we can discuss them.